Home prices have been climbing for years, but the pace of that growth is beginning to cool. That may be good news for some buyers, but relatively few Americans can still find a place they can afford to buy.

 

Redfin, a national real estate brokerage, recently estimated that there are almost half a million more home sellers than buyers in today's housing market. In 2023, buyers outnumbered sellers but last year the trend turned. Sellers outnumbered buyers by 6.5 percent. Today, sellers outnumber buyers by 33.7 percent, which is the most significant gap since 2013.

 

The recent economic uncertainty has sparked a willingness to sell but has also made buyers hesitant. The upcoming threat of tariffs on foreign goods, their potential impact on the economy, and concerns about possible layoffs, such as those affecting federal workers, have combined to reduce demand for housing. 

 

If history is any guide, when the trend reverses, housing prices drop. That appears to be happening in select areas, such as Florida, California, and Texas, but only modestly so far. The combination of high house prices and lofty mortgage rates is taking its toll.

 

Statistics indicate that the housing inventory has increased nationwide. Single-family home construction is expected to grow by 3 percent, while multifamily starts are projected to decline by 4 percent. Theoretically, this means buyers have more options, which can help ease price pressures. However, beneath the surface of the housing market, the supply of houses in the lower and middle price tiers remains subpar and more volatile than at the high end of the market.

 

Buyers are also struggling to find anything they can afford, especially first-time homebuyers. The median price of a home sold in the U.S. during the first quarter of the year was $417,000, 33 percent more than it cost in 2019 before the pandemic. First-time buyers are looking for something cheaper than the average, but even then it's hard to find something they can afford. A typical home will cost a buyer $361,000 in 2025, according to Zillow, compared to $354,000 last year.

 

Thanks to inflation, a tighter Fed policy, and concerns about the country's growing debt and deficit, interest rates have risen significantly in the last several years. Mortgage rates have climbed above 6.92 percent. The average rate on a 30-year fixed mortgage hasn't dipped below 6 percent since 2022, according to Freddie Mac. As such, most consumers who took out new mortgages in recent years have rates above 6 percent.

 

Over the last several years, as interest rates continued to rise, many U.S. homeowners who were lucky or astute enough to lock in a mortgage rate of 3 percent or less in the past, stayed put. Sure, prices were going up for their home, they reasoned, but so were mortgage rates. At current rates, they would be crazy to sell.

 

But the years are passing, and many empty-nester homeowners are getting older. Others are changing jobs or getting divorced. Some are having more children. The pressure to sell is mounting. The sticker shock of paying twice your existing mortgage rate or more is waning, and what's to say that mortgage rates won't go even higher?

 

Home prices declined in 11 of the top 50 most populous metro areas in the last month. The spring buying season has been sluggish, to say the least. To be sure, no one is looking for a market crash or anything remotely like it. However, the higher long-term interest rates climb, the more buyers will disappear.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The American tradition of firing up the backyard grill for a BBQ among friends and family is upon us. However, this year's record high prices for beef, brought on by generational lows in cattle inventories, make serving up steaks and hamburgers a budget-busting event.

 

A look at cattle futures on the Chicago Mercantile Exchange (CME) reveals what we can expect in terms of price increases this summer. Over the last month, live cattle futures have hit a record high of $2.18 a pound. That is a record high. Prices are up 22 percent from the same time last year. In comparison, pork prices are forecasted to rise by 1.8 percent, while poultry prices are expected to increase by a mere 1 percent

 

Grilling season officially began on Memorial Day and runs through to Labor Day. For whatever reason, the lion's share of grilling is packed into the days between Memorial Day and the Fourth of July. Your local supermarket or grocery store has already stocked its meat counters by buying steak, ribs, ground beef, and other meat selections from wholesalers to lock in supply.

 

But before you blame food companies for gouging, consider that companies such as Tyson Foods have reported a second-quarter loss of $285 million in its meat division, where a $470 million cost increase hit them in their beef-packing operations. What, therefore, is the core problem in the sky-rocketing price of meat?

 

I have said it before, and I will say it again — climate change. The U.S. Department of Agriculture reported that the total cattle herd in the U.S. is 86.7 million head. That is a generational low dating back to 1951. The changing weather has caused drought conditions in grazing and farming lands throughout the nation. That not only limits ranchers' ability to add more animals to the herd but has also increased the cost of feeding them, as feed prices have also risen.

 

That's tough going for the average hard-working rancher, who is now in his sixties. Drought, rising feed prices, water scarcity, the threat of tariffs, and increasing prices for everything from diesel to tools and tractors leave little room for profit.  Many are retiring, and few are taking their places. The cost of starting a farm or ranch requires enormous capital, and few are willing to risk it in this environment.

 

Producers are taking steps to reduce costs, including raising heavier animals, closing inefficient meat-packing facilities, and encouraging growers to replenish their herds. If, by some miracle, this were to occur, it would still require 18-24 months for the calf to grow into a harvestable animal. In the meantime, the trend is not your friend. Unfortunately, since most of the world has given up on addressing climate change, the only real solution to rising meat prices is to accept higher prices.

 

At some point, that steak or hamburger will cost so much that it could cause a massive shift in consumer preferences. When that occurs, is anyone's guess. As for your next BBQ, you have three choices: take out a loan, switch to chicken, pork, or fish, or pray for rain.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

As Pope Leo takes control, the church's financial health will be high on his agenda. The Holy See, which is the governing body of the Vatican, is also the business arm of the Catholic Church.

 

The Vatican is audited by the Office of the Auditor General, which was established in 2014 by Pope Francis. In addition, the Council for the Economy supervises financial operations, and the Secretariat for the Economy (headed by a cardinal) is responsible for financial matters. External auditors, including PricewaterhouseCoopers, review the Vatican's financial statements. In the past, the information on the church's economic health has been murky at best.

 

Through the efforts of Pope Francis and before him, Pope Benedict XVI, the transparency of the church's finances has increased, but in many cases, there is still no evidence that the numbers released are accurate. We do know that last year, the church's worldwide income was around $1.25 billion, with expenses reaching $1.34 billion. In 2023, the church was running a $90 million deficit, according to Crux, an online news organization, and that deficit is presumed to be growing.

 

Part of the problem has been mounting operational expenses, which have outstripped donations, a primary income source. Observers note that much of the church's growth (and expenses) in recent years has been in poorer, less-developed regions. Much of its revenue streams have come from its affluent U.S. and European base.

 

The Vatican reported that its' collections (called Peter's Pence) had yielded 52 million Euros in 2023, with more than 25 percent coming from U.S. parishes, but the expenses were 109 million euros. In addition, Vatican tourism has declined since COVID-19, while increased litigation due to the sexual abuse scandals and the rising cost of supporting an aging clergy has contributed to the deficit.

 

 The church's pension fund is in trouble as well. Officials have expressed concern over its unfunded pension obligations (estimated at over $900 million) and an aging workforce. This shortfall could force both staff reductions and salary cuts unless remedied. Part of the problem, say the critics, has been 30 years of mismanagement by the last three popes, who were all in their mid-70s, without the expertise or financial focus to rectify the situation.

 

The clergy and the faithful will argue that the primary purpose of the Catholic Church is not to make a profit. I agree, but money sure helps spread the word. Over the last 100 years, popes have devoted most of their time, effort, and cash resources to bringing people closer to God while promoting humanitarian causes worldwide.

 

Pope Francis, for example, sought to reorient the church toward the poor around the globe while critiquing the global economy and its leaders for its lack of economic justice, migration, and ecological failures. 

 

Robert Prevost, now Leo XIV, does not have a background in finance, although he was a math major at Villanova University outside of Philadelphia. That skill might help in tackling the Holy See's looming financial issues. He is considered moderately conservative, but his past roles suggest a focus on service rather than savings and financial management.

 

Leo XIV's challenge will be to continue and expand his predecessor's effort to implement structural, procedural, and oversight changes in the bank and other organizations. He must also win over those in the church bureaucracy that maintain and defend the culture of secrecy that hamstrung Pope Francis throughout his term.

 

Managing such a far-flung religious empire creates its own financial challenge. Needs differ, sometimes dramatically, from country to country, as do donors. His message to those in the developed world, especially in the U.S. and parts of Europe, must account for the recent trend towards conservatism among its many members in those regions.

 

How Pope Leo squares that with continued attention to developing markets will require a high degree of sensitivity and finesse. He is on record opposing much of President Trump and Vice President Vance's positions on immigration and other issues. However, a softening of such rhetoric may be required to bolster support within the U.S.

 

Many believe the key to squaring the church's books depends on American donors' willingness to dig deeper into their pockets for Peter's Pence. It may be no coincidence that the Papal Conclave's College of Cardinals voted for an American as the leader of its 1.4 billion-strong congregation. Who better to increase collections in America than an American pope? If so, Pope Leo may already be making progress.

 

Vance led an American delegation, including Secretary of State Marco Rubio, to the pope's inaugural Mass this week in Rome. President Trump has extended an invitation to the pope to visit the White House as well. With less than two weeks in office, Pope Leo has also thrust himself and the church into the middle of geopolitics by his willingness to bring Ukraine and Russia to the peace table.

 

That should come as no surprise. The role of mediator has long been a tradition within the Catholic Church. Over the last century, popes have functioned as mediators to end international conflicts with varying success. Pope Benedict XV attempted to persuade Italy to enter World War I. When that failed, he offered papal peace mediation throughout the war. Pope John Paul, a native Pole, brokered talks between the workers' union Solidarity and the Polish government. Pope Francis attempted to persuade representatives from Palestine and Israel to bring peace to the Middle East and worked in Southern Sudan to end a civil war.

 

By offering to host negotiations between Ukraine and Russia, Pope Leo is following in the footsteps of his predecessors. First reactions indicate that it is something that may be amenable to both sides. It also appears to have the approval of President Trump. To say that Pope Leo has made a strong impression on global leaders and his congregation right out of the gate is an understatement. Let's hope he can do the same with church finances.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

As America's Pope Leo XIV  begins his reign at the head of the world's smallest country, this Catholic sovereign city-state's financial and economic challenges wait to be addressed. It may take more than American ingenuity to accomplish that.

 

Located in Rome, the Vatican encompasses 110 acres with a population of under 1,000 souls. However,  despite its size, the Vatican has had an outsized impact and influence on the financial world thanks to its investments in real estate, banking, and private enterprises.

 

Those new to the inner workings of the Catholic Church should know there is a difference between the Vatican and the Holy See. The Vatican is the physical area where the Holy See resides. The Holy See is the governing body of the nation. If you were to enter a financial contract with the territory, it would be with the Holy See.

 

The Holy See generates revenues from a variety of sources. It collects donations from the faithful worldwide (called Peter's Pence, a term dating back to the 8th century), as well as from interest and investments. Many of its investments are in real estate, where it holds land and churches around the globe.

 

Historically, the Holy See has primarily invested in Italian industries but has kept its stakes below 6 percent. Over the years, it has also expanded purchases overseas, but always in proven companies within strong industries. It also invests in stocks and bonds where it takes a long-term, buy-and-hold investment philosophy. However, as a faith-based entity, it will not make investments in companies that go against church values.

 

In contrast to the Holy See, Vatican City derives revenues from a few small industries. It employs a labor force of 4,800 people who interact with millions of tourists annually. These travelers visit the Vatican, its museum, the Sistine Chapel, and St. Peter's Basilica. The Vatican is thought to do a thriving business in admissions and sought-after sales of stamps, coins, and publications. How much exactly is a tightly kept secret.

 

Finally, the Institute for the Works of Religion, known as the Vatican Bank, rounds out the church's financial picture. Pope Pius XII founded this private bank in 1942. It has been the most controversial of the church's assets, plagued by scandal, accusations of mismanagement, money laundering, and fraud. 

 

In 2022, Pope Francis tried to clean up the bank's tarnished image. He strengthened the bank's role as the exclusive manager of the Holy Sees's financial assets and connected institutions. He followed that up in 2023 by overhauling the Vatican's oversight, auditing, and supervision functions of the bank and its employees. In 2023, the bank claimed $33.2 million in income and managed $5.9 billion in client assets.

 

It wasn't easy, and he fought every step of the way from within. The specifics of the church's finances have always been shrouded in secrecy, even from the pope himself, and tradition is difficult to change, especially within the church hierarchy.

 

Pope Francis hired outside managers to circumvent those barriers and implement his reforms. Most of these hires have since resigned, stymied by roadblocks thrown up within the church bureaucracy.

 

Next week, we will examine the state of finances within the Catholic Church today and the challenges the new pope will need to overcome to win the day for his worldwide congregation.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The lifeblood of emerging markets has always been their exports within a framework of robust global trade. The advent of U.S. tariffs worldwide has placed these countries between a rock and a hard place.

 

The rock is clearly the size and extent of U.S. tariffs. These new tariffs have dwarfed the imposition of levies during the first Trump presidency. Back then, the U.S.-China trade war benefited some emerging market (EM) countries by attracting increased foreign direct investment and manufacturing as alternatives to Chinese trade.

 

It also meant increased exports in some cases, especially in agricultural products. In response to the U.S. tariffs on their goods, China hit back by raising their own barriers to U.S. imports. China reduced agricultural imports from the U.S. and increased its purchases of soybeans from Latin America.

 

In addition, since the last trade war, foreign direct investment into key emerging markets such as Mexico, Vietnam, and Indonesia have steadily increased. A large part of this new investment came from China and Hong Kong. Faced with a continued rise in U.S. tariffs and restrictions under the Biden presidency, China relocated some of its manufacturing to regions that had avoided U.S. tariffs. This allowed Chinese exporters to end run tariffs and continue selling to the U.S. market through other countries. Trump 2.0 is closing that loophole.

 

However, China has upped its trade game in response. As tariffs bite and domestic demand remains subdued, China pivots away from U.S. trade. Chinese imports into the U.S. have declined from 21 percent in 2018 to 14 percent in 2023. That total has dropped further since then. Economists estimate that total trade with the U.S. today only accounts for 2 percent of China's Gross Domestic Product. To compensate for the American market shortfall, China has turned its attention to exporting its excess capacity to other developed markets in direct competition with other EM exporters.

 

At the same time, imports from China have exploded higher throughout emerging markets. And it is not just intermediate goods that make up more of the advanced products they routinely re-exported to America. Final goods from China are now flooding into EM countries, which are displacing local industries and jobs.

 

This surge of "Made in China" imports has forced several countries to raise tariffs (with the urging of the U.S.) on Chinese imports. Their domestic companies simply could not compete against this flood of cheaper-than-cheap imports.

 

In desperation, Mexico has raised tariffs on textile and apparel imports from China to 35 percent. Thailand and Malaysia have levied a 7 percent and 10 percent value-added tax. Even Russia, which relies on China's trade, recently imposed restrictions on Chinese auto imports for the same reasons.

 

Many EM nations acknowledge that China still plays a crucial role in their medium-term growth and development, especially in Asian countries. This places them in a hard place to preserve their domestic industries while maintaining good relations with the world's No. 2 economy.

 

And yet, Southeast Asia nations were also among the hardest hit on "Liberation Day." On July 4, when the 90-day temporary reduction expires, that region's tariffs will skyrocket to almost 50 percent. That will be a devastating blow to EM economies. Many economists predict that the gross domestic product among EM countries could be cut in half if those tariffs are implemented.

 

The implicit message from both of the world's leading economies is that emerging markets should decide which side to back. The rock and the hard place for many nations will be choosing between the U.S. and China. Retribution for picking the wrong partner could be costly on several fronts.

 

Chinese President X Jinping calls on his trading partners to "uphold the common interests of developing nations." He argues that the "Global South," a term referring to a collection of countries (that now number 134 nations), should pull together. This so-called "Group of 77," mainly in the southern hemisphere, are considered developing or less developed countries than those in the Global North.

 

These nations, mainly in Africa, Asia, Latin America, and Oceania, often have lower income levels or share common political and economic interests. Many of these countries are now developing trade and other strategic alliances, often with the support of China.  

 

In contrast to China, the U.S., over the last 100 days, has made it clear that "America First" means just that on both the geopolitical and economic front. Relationships between America's traditional allies and trading partners have been upended.

 

Given the U.S. backpedaling in its support for Ukraine, Canada, Mexico, and others, many nations worldwide, including those in emerging markets, have concluded that while powerful, the U.S. has become an unreliable partner. They walk a fine line between these two powers and have little room for error.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.